What percentage of our paychecks should go toward which specific expenses so we don't go into debt?
Figuring out how to divide your paycheck is crucial in reining in your finances. Here are guidelines of the maximum percentages to put your monthly earnings toward:
35% housing: This means your mortgage, taxes, home insurance, maintenance, and any other living costs (utilities, renovations, and the like). Before you sign on the dotted line for a mortgage, create a new budget that includes what the monthly payments would be. If you're cutting it too close, it isn't worth it.
15% transportation: Including car payments, gas, repairs, insurance, and public transport
10% debt repayment: Pay more toward your credit card debt and the minimum on your student loans. In most cases, student loans are cheaper debts (because of the low interest rates) that are okay to stretch out.
10% savings: Put aside money for your 401(k), IRA, and other safety-net funds. If you can't do 10, save 5 percent and up your savings by at least 1 percent a year.
25% everything else: Besides medical treatments, food, and other essentials, this is where you can be the strictest with your budget. Track this spending closely. If you can cut corners each month, you might be able to put more money toward your home, retirement, or paying off debt.
Nestpert Jean Chatzky is a money coach, the financial editor for the Today show, and the author of of five books
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